photo credit: alancleaver_2000

Intel Corp (the world’s largest chip maker) with a group for other 24 venture capital firms has declared that it will invest $3.5 billion in U.S tech startups over the coming two years to accelerate and promote domestic job growth. The investments will mainly focus on information technology and bio-technology (or clean technology).

Intel believes (and the US also) that it faces stiff competition in the areas of education and innovation from India and China. The CEO of Intel argued that the United States should lead the global race for innovation.

Intel has also taken initiatives in the past when it comes to investing or hiring graduates. Google, HP, GE and Dell Inc. also encourage graduate hiring.

A good step taken by Intel for promoting innovation and startups

For more details we suggest you read the Business Week Post here
http://www.businessweek.com/news/2010-02-23/intel-venture-firms-to-invest-3-5-billion-in-u-s-startups.html

Intel takes stakes in companies that have technology that can be used to increase future processor sales.

photo credit: wili_hybrid

Crowd Funding can be described as a trend that aggregates small amounts of money from many people for a certain cause which can range from helping a charity to funding a clothing design. The networking and pooling for funding is usually done through the internet.

Companies have been tapping funds for customer service and product design for quite some time now but tapping the crowd for funds is a bit trickier. However, there is great potential for startup financing through crowdfunding.

An entrepreneur who wants to use crowd funding makes use of online communities to solicit pledges of small amounts of money from individuals (typically not professional financiers).

The biggest problem with crowd funding is that if a small contribution obtained via crowd sourcing is actually an ‘equity investment’ (or even a loan) then crowd funding companies may soon run faulty of security laws. For example: If you raise money from over a certain number of people, you are subject to a full-fledged list of security laws. (Rules vary according to country). Also crowd funding scams can be huge but where money is involved, scammers will come automatically.

So is crowd funding a Web 2.0 twist or the future of online fundraising?

I believe that crowd funding is here to stay and has enormous potential. It is still in its initial phase but it’s going to get better.

On this note I remember an online platform for crowd funding for web and mobile startups was launched recently - GrowVc

For more information we suggest you read this post and an article in businessweek

photo credit: Aidan Jones

Incubators (or business incubators) are programs aimed to accelerate the growth of entrepreneurial companies by providing them with an array of business resources and services. Incubators may vary in the style in which they deliver these services, in the type of clients they serve or the organizational structure they have.

Incubators are especially dedicated to growth and development of start up companies. Research and Technology parks on the other hand support large scale projects that support everything from corporate, government or university labs to very small companies.

A successful incubator I would like to mention here is Y incubator launched by Paul Graham in 2005. It has funded over 60 startups and still continues to inspire many others. The model followed by Y incubator has been imitated widely through out the world and hence there are many incubators around the world offering good services and seed funding to startups.

If you’re a startup founder looking for seed funding, here are a few incubators suggested by ReadWriteWeb: Y Combinator, TechStars, SeedCamp, Summer@Highland, Launch Box, Bootup Labs etc. For more details on this please visit

http://www.readwriteweb.com/archives/guide_to_seed_fund_incubators.php

While Graham may not like it, there are a large number of start up incubators following the model he created with Y Combinator and handing out microinvestments in web startups in return for a small stake.

photo credit: lumaxart

Venture Hacks recently launched a new project aiming to bring startups and angel investors closer.

Venture hacks launched AngelList which is a basic directory of around 80 established angel investors including their contact info and key information like what they’re looking for in a startup etc. The members of AngelList will receive weekly updates from Startuplist (the second project launched by Venture Hacks).

StartupList will be a great boon for all startups looking for angel investors. So if you’re a startup looking for early investment and you have no idea how to get to potential investors then this project is definitely for you. To get on the list you need to apply here.

Venture Hacks will send weekly emails featuring three startup pitches to some of Silicon Valley’s most respected angel investors.

Kudos to Venture Hacks. Great effort and all the best

photo credit: liewcf

The post is a gist of the speech by Jay Jamison discussed in his blog leaving the flock

At an early stage all startups are usually advised to focus on building a great product/service and getting an audience. And then revenue will flow automatically. How right is this concept? Is it advisable not to think about the revenue too early in the life of a startup?

It is extremely important to focus on your idea and building something people want, but at the same time thinking about the revenue model (at least a bit) at an early stage is recommended as well. Don’t divert your attention from the main goal since a great product is the lifeline of a startup. But it is also advisable to at least have a revenue model which you can always change it later on. Don’t rush into monetizing though, monetize when it makes sense.

A startup can have various kinds of business models, the popular ones being;

Figure it Out Later/ Ads (Google, Twitter)
Market Maker (Paypal, Ebay)
Freemium or Subscription (Animoto, Salesforce.com)
Virtual Goods (Facebook applications)
Price Per Use or Copy (MS Office)

Another important suggestion for startups is – know your industry model inside out. It is very important to analyze the industry. Ask tons of questions and connect with customers and market. Build a belief that your revenue model will work in the industry model.

I’ll talk about my thoughts on types of revenue models, a sort of revenue model 101.  Nothing too revolutionary here, but hopefully a useful primer if you’ve not thought through a business model before

photo credit: billaday

The Wikipedia definition of a Term sheet – a bullet-point document outlining the material terms and conditions of a business agreement

It can be described as a non- binding document (like a Letter of Intent) which records two or more parties’ intentions to enter into a future agreement.

Venture Capitalists (VCs) backing out of a term sheet agreement for any reason can be very harmful to a company’s reputation.

If the VC has agreed on the conditions of a term sheet earlier, and then for some reason has backed out, then it’s not his fault. The term sheet by no means is legally binding upon any party involved in the contract.

VCs generally have valid reasons before they decide to back out from investing. Any void term sheet can be devastating for a startup company. If one VC backs out of an offer, then other ‘potential investors’ will look at a startup suspiciously and raising investment will become difficult.

Just remember – be diligent, don’t over promise and NEVER forget that a term sheet is not legally binding.

Read the following articles for a greater insight on the matter:
http://www.readwriteweb.com/start/2010/02/how-your-term-sheet-affects-yo.php
http://cdixon.org/2010/02/03/backing-out-of-a-term-sheet/

It was at Bessemer that I learned you never back out on a term sheet except in cases of fraud etc. I never saw them back out on one nor have I heard of them doing so

photo credit: Jeff Belmonte

A startup’s model/product usually undergoes a significant change from the point of founding to the point of funding. How the capital flows into a startup is very critical and quite difficult to manage.

Startups can either have too much capital, too little capital, or poorly applied capital – and execution of the startup model in presence of any condition mentioned above can be harmful to the business. Capital investment of a startup determines two crucial things; health of a startup and more importantly, the relationship between a startup and its investors. The concepts of capital discipline and slow capital provide a framework for managing this relationship.  

Capital Discipline – to raise and use capital wisely. Take a lean oriented & customer – focused approach. A minimum-product viable strategy will be ideal to get money and feedback from early adopters. Raise ‘just enough’ capital and try being independent from the time framework since sometimes it may takes years to achieve what your startup model actually aimed for.

Slow Capital – A sense of urgency is important for capital investment but don’t rush to conclusions. This point is particularly beneficial for investors as well-thought investment decisions are precisely what they’re looking for.

Start with small investments and grow with the company.

Capital should be poured into a startup depending on its stage of development.

Capital should be consistent, transparent and disciplined. This is the key for a startup to be successful and to get off on the right foot.

We suggest you read the article at GigaOM for more detail

And that requires a new sort of relationship between startup and investor, one in which the historic friction associated with bringing capital into a startup over time is reduced or eliminated.

photo credit: alice_c

The concept of lean startups is gaining prominence in today’s economic scenario. The term lean startup stems from the term ‘lean thinking’ which means spending money wisely by identifying differences between value-added activities and waste.

Many startup owners commit the blunder of spending extravagantly as soon as they receive some funding. An advice here; even if a startup gets all money in the world, it won’t help unless you have a product or revenue model.

Funding shouldn’t be mismanaged; there is an ‘implied contract’ of getting the company to an agreed level in the hope of increasing the value of the business. The stakeholders in an early venture should also benefit for their contribution.

So, waste less on luxury items and develop a practical approach for creating and managing a startup that excels in low-cost experimentation, rapid iteration, and true customer insight.For a detailed insight, visit:
http://www.readwriteweb.com/readwritestart/2010/01/when-your-funding-is-your-wors.php

"In early-stage companies, you will regret such spending when you hit the bumps in the road where you wish you had that cash. Inevitably, you will hit such bumps. Plan accordingly."

Make sure you have a revenue model since the beginning and remember – ‘money should only be spent if it provides return’.

photo credit: star5112

Startup founders can pay back their investors by either selling the business to bigger companies or offering shares to the public (IPO). Public offering seemed to be the ultimate goal of every startup since it promises continuing returns and expansion. Yes, its true many startups still dream of a place on the NASDAQ and startups like Twitter, Facebook, LinkedIn, Zynga also want to go public rather than sell.

But in a recent survey of startups by venture capital firm DCM, only 19 percent wanted to go public. Many startup founders mentioned that a major barrier to go public was the strict regulations for public companies. They believe that there is so much emphasis on paperwork and legislation that a startup can’t focus on actually building a business. Newer restrictions are making public offerings less and less attractive for startups.

"People don't want to run public companies anymore because they don't want to get dragged through the mud," said Rob Coneybeer, a managing director at the investment firm Shasta Ventures

Read the article below for more information:
http://www.mercurynews.com/business/ci_14218184?source=rss&nclick_check=1

Businesses spend money before they even open their doors. Start-up expenses are those expenses incurred before the business is running. Many people underestimate start-up costs and start their business in a disorganized, unplanned way. To determine your startup costs, you must identify all the expenses your business will incur during its startup phase. A critical factor in determining these expenses are the length of time it’s going to take to open your business.

It is true that every business is different and has its own specific cash needs; therefore there is no generic method for estimating your startup costs. But the article below makes a good attempt in breaking down the mystery and creating a clear picture of expenses that your startup will need.

http://www.startupnation.com/articles/1248/1/startup-costs-new-business.asp

A timeless and probably a cliché suggestion but “Beware of the little expenses; a small leak will sink a great ship.” – Benjamin Franklin

No matter what your business type, take into account everything you will spend, from the moment you dig in to the startup process, through the time you're ready to sell a product or service. If you need three months from the time you sign a lease to the time you can put the "open" sign on your retail storefront, calculate how much money you will need for salaries, electricity, rent (and your mortgage payment!) during those three months.